Federal Reserve should undergo thorough audit

May 7, 2011

Freedom New Mexico

Free government is open government. Citizens need to know what’s going on in their government to make informed decisions on Election Day.

But there is one major, nondefense sector of the federal government that never has been completely audited: the Federal Reserve System, which prints and controls the dollar and sets associated interest rates. Although parts of the Fed, as it’s called, are private, its Board of Governors is appointed by the president and confirmed by Congress. And most Fed profits, $79 billion of $82 billion earned in 2010, go to the U.S. Treasury.

Rep. Ron Paul, R-Texas, has proposed HR459, the “Audit the Fed” bill, to find out exactly what’s going on in this powerful institution. “The Fed spends as much money as does Congress,” Rachel Mills, Rep. Paul’s communications director, explained to us. “Yet there is no oversight or accountability over the terms on which they give loans. This has a huge impact, in particular on the cost of living. In the interest of transparency, the American people have a right to know what’s going on.”

A similar bill by Rep. Paul was defeated last year. But Sen. Bernie Sanders, I-Vt., included a watered-down auditing section within the Dodd-Frank finance reform bill that did pass. Although inadequate, the audit revealed who got the $3 trillion the Fed handed out during the 2008-09 financial crisis. Sen. Sanders commented on the audit, “The Federal Reserve bailout was welfare for the rich and powerful, and you-are-on-your-own rugged individualism for everyone else.”

Among the loans given out by the Fed: $165 billion to the United Bank of Switzerland (UBS); $97 billion to the Deutsche Bank in Germany; $33 billion to Dexia SA Bank, based in Paris and Brussels; and $198 billion to the Bank of China. The Arab Banking Corp. got $5 billion in loans at a time when it was 29 percent owned by the government of Libya, headed by Moammar Gadhafi, whom the United States now is attacking.

While a record-high number of Americans were suffering home foreclosures, foreign banks were getting hundreds of billions of easy cash from the Fed.

Speaking Feb. 3 before the National Press Club, Fed Chairman Ben Bernanke insisted that the Dodd-Frank legislation “has basically created a completely transparent Fed as far as the financials are concerned.” He said the Fed already has revealed all 21,000 loans made during the financial crisis, “which, by the way, were paid back with interest.” He said the Fed is audited every year by the Deloitte Touche accounting firm. “Every aspect of the Fed’s dealings are wide open.”

But “what Audit the Fed means,” he charged, is “auditing monetary policy” on “whether or not the Fed was making the right policy decisions.” He said that this was a challenge to the Fed’s ability “to make monetary decisions independently.”

In a few months we will know the results of this GAO audit and can better formulate potential next steps.”